Công văn 15057/BTC-TCT

To: Provincial-level Tax Departments

The Ministry of Finance has received official letters of some provincial-level Tax Departments and business establishments inquiring about the application of VAT rates on goods and services provided by domestic business establishments to organizations and individuals in non-tariff zones. Regarding this matter, the Ministry of Finance gives the following opinions:

1. For services provided by domestic business establishments to organizations and individuals in non-tariff zones.

Point 1, Section II, Part B of Circular No. 129/2008/TT-BTC of December 26, 2008, guides: “The tax rate of 0% is applicable to exported goods and services; construction and installation of works of export processing enterprises; goods sold to duty-free shops; international transportation; exported goods and services not liable to VAT, except for cases not subject to the tax rate of 0% specified at Point 1.3 of this Section.”

It is guided at Point 1.1.b, Section II, Part B of Circular No. 129/2008/TT-BTC as follows:

“Exported services include services provided directly to overseas organizations and individuals or those in non-tariff zones.

Overseas organizations are foreign organizations without permanent establishments in Vietnam other than VAT payers in Vietnam;

Overseas individuals are foreigners not residing in Vietnam and overseas Vietnamese not present in Vietnam during the provision of services;

Organizations and individuals with business registrations in non-tariff zones, and other cases specified by the Prime Minister.”

Point 1.2, Section II, Part B of Circular No. 129/2008/TT-BTC guides conditions for application of the tax rate of 0% for exported services as follows:

- Having a contract on service provision with overseas organizations and individuals or those in non-tariff zones;

- Having documents of via-bank payment for exported goods or services and other documents under law;

According to Point 1.3, Section II, Part B of Circular No. 129/2008/TT-BTC cases ineligible for the tax rate of 0% include:

“Offshore reinsurance; offshore technology or intellectual property right transfer; offshore capital transfer, credit provision or securities investment; derivative financial services; outbound international post and telecommunications services; exported products being exploited natural resources or minerals not yet processed into other products; goods and services provided to individuals without business registrations in non-tariff zones, except for other cases specified by the Prime Minister;

- Petrol and oil which are sold in the inland to automobiles of business establishments in non-tariff zones;

- Automobiles sold to organizations and individuals in non-tariff zones.

- Services provided by inland business establishments to organizations and individuals in non-tariff zones but performed and used outside these zones, such as lease of houses, meeting halls, offices, hotels, warehouses and storing yards; transportation of workers to and from workplaces.”

Based on the above guidance, the Ministry of Finance guides the application of VAT for services provided by inland business establishment to organizations and individuals in non-tariff zones as follows:

- Services provided by inland business establishments to organizations and individuals in non-tariff zones ineligible for the tax rate of 0% include: lease of houses, meeting halls, offices, hotels, warehouses and storing yards; transportation of workers to and from workplaces; and food and drink catering services (except for provision of industrial rations or foods and drink catering services in non-tariff zones).

- Other services provided by inland business establishment to organizations and individuals in non-tariff zones in service of the latter’s production and business satisfying conditions specified in Point 1.2, Section II, Part B of Circular No. 129/2008/TT-BTC are eligible for the VAT rate of 0%.

2. For conditions of customs declarations for VAT credit and refund for goods being stationery or goods for daily operations provided by inland business establishments to export processing enterprises.

Clause 3, Article 21 of the Government’s Decree No. 29/2008/ND-CP of March 14, 2008, providing for industrial parks, export processing zones and economic zones, stipulates:

“3. Export processing enterprises may purchase stationery, food, foodstuffs and consumer goods from inland Vietnam to serve the administration of their office apparatus and daily-life activities of their staff members and workers. They may choose to or not to carry out import, export and customs procedures for these goods.”

In the last paragraph of Point 1.3.c.2, Section III, part B of the Finance Ministry’s Circular No. 129/2009TT-BTC of December 26, 2008, on VAT policies, guiding conditions for VAT credit and refund for exported goods and services, specifies cases in which customs declarations are not required: “Business establishments that supply electricity, water, stationery and goods for daily operations of export processing enterprises.”

Accordingly, goods for daily operations of export processing enterprises provided by inland business establishments are not subject to customs declarations include: food, foodstuff, kitchen utensils, and protective outfits.

Any problems arising in the course of implementation should be promptly reported by units and business establishments to the Ministry of Finance for settlement.